Gehlen Dabbs Lawyers
Call Us
T: 604 757 9380
Call Us : 604 757 9380
Main navigation

Bankruptcy and Insolvency Archives

Environmental claims: Lenders, beware of cleanup obligations

The Supreme Court of Canada ("SCC") will once again weigh in on the interplay of bankruptcy and environmental protection. On Nov. 9, the Alberta Energy Regulator ("AER") was granted leave to appeal a ruling of the Alberta Court of Appeal that allowed a bankrupt oil company, Redwater Energy Corporation, to sell off about 20 producing oil wells for the benefit of secured creditors, while disclaiming interests in about 100 abandoned wells which were subject to cleanup orders from the AER. The ruling effectively provided the assets of the company to secured creditors free of any liabilities for environmental cleanup of the abandoned wells. 

Insolvency -- Set-offs vault over court stays

When an insolvent company seeks creditor protection through the courts, all claims against the company are stayed and cannot be pursued. If the company restructures, unsecured creditors will normally see their claims against the debtor sharply reduced and repayment periods extended. If the company is assigned into bankruptcy, unsecured creditors will often receive pennies on the dollar or see their claims go entirely unpaid.

Insolvent Individuals

An individual may become insolvent for a variety of reasons. For many people, it may be a matter of over use of credit cards or other credit facilities. For the individual who owns or operates a business, if the business becomes insolvent, the individual may also find himself or herself to also be insolvent. Regardless of the reasons for insolvency, there are options available for individuals under the Bankruptcy and Insolvency Act (the “BIA”).

Equitable Subordination - Will it find a home in Canada?

When a debtor is insolvent, recovery by a creditor will generally depend on the creditor's ranking. Secured creditors will have priority over preferred creditors who in turn have priority over unsecured creditors. If a claim can be characterized as an equity claim, it could be further subordinated. Notwithstanding these general rules, the Supreme Court of Canada could soon give courts wider discretion to adjust priorities even further in certain situations.

Redwater Case Update: Court of Appeal upholds l seek leave to appeal to Supreme Court of Canada

When an oil well operator becomes insolvent, a significant liability will often exist for "orphan wells," wells with environmental remediation costs which exceed any remaining value. Under provincial legislation, such remedial costs must be paid before even secured creditors recover any money. But does this legislation, having the goal of environmental protection, conflict with the priority regime under the federal Bankruptcy and Insolvency Act("BIA")?

contact us today

Bold labels are required.

Contact Information

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an lawyer-client relationship. Confidential or time-sensitive information should not be sent through this form.


Privacy Policy